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BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN

1.0

BUSINESS DESCRIPTION

Business Description
The company XYZ COMPANY will engage in the import/export of cereals
and grains between Uganda and South Sudan. The whole function includes
the supplier/buyer identification, contracting and consultation for future
market expansion. The secondary operation of the company will be the
acquisition of in-demand cereals and grains for trading purpose in the
Republic of South Sudan. This includes exportation of cereals and grains to
the Republic of South Sudan that will be exclusively sourced from Uganda.
The XYZ COMPANY expects to do a successful import/export trading
business between South Sudan and Uganda as the directors have good
communication skills in the local languages of both countries as well as
excellent command in the English language.
Introduction
XYZ COMPANY was founded in the Republic of South Sudan in 2015. As a
young and ambitious growth company, XYZ COMPANY projects to emerge
as one of East Africas largest and most respected traders in agricultural
products. XYZ COMPANY plans to establish supply chains extend across
east African countries within the next 10 years.
The XYZ COMPANY envisaged supply chain will penetrate deeply into
remote agricultural regions where we shall be procuring commodities from
smallholder farmers through strategically located centres. The commodities
will then be accumulated at XYZ COMPANY nodal warehouses and/or
transported to processing facilities, prior to reaching our customers.
It is therefore the ambition and intention of XYZ COMPANY to move and
trade in not less than 20,000 metric tonnes of maize grain and other cereal
products between Uganda and the Republic of South Sudan while providing
direct employment to more than 600 people annually.
It is the mission of XYZ COMPANY to provide complete import/export
trading services including purchase contracts, shipping, warehousing, and
delivery scheduling. The company will concentrate on the purchase of maize
grain from Uganda for sale to the food deficit areas in the Republic of South
Sudan.
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BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN


The Company
XYZ COMPANY will be a limited liability partnership registered in the
Republic of South Sudan and the Republic of Uganda. Its founder is Mr. ABC.
Mr. ABC has brought together a highly respected group of individuals who are
well versed in agricultural import/export trade processes.
The company has a limited number of private investors and does not plan to
go public. The company has its main offices in Juba, South Sudan. The
facilities include conference rooms and office spaces. The company expects
to begin offering its services in June.
The Services
The primary operations of XYZ COMPANY will be import/export trading, in
addition to market exploration services. Other sources of income for the
company would be the trade in different imported products which the
company would sell locally to wholesalers in Juba and the other big towns of
South Sudan.

Supplier/Buyer identification
Purchasing, contracting and consulting
Market exploration services
Road transportation
Warehousing
Delivery

It must be noted that XYZ COMPANY does not possess any warehousing
facilities and intends to outsource this particular service during the first year
of the project. We expect to earn revenues by charging a commission based
on the value of goods moved per order.
Products
In demand products such as cereals and grains (especially maize grain and
maize flour).
The Market
The market for white maize in the Republic of South Sudan is continuing to
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BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN


expand as a result of shortages in food supply occasioned by the ongoing
internal conflict situation that has disrupted agricultural production in large
parts of the country. Much of the food that is consumed in South Sudan is
now being currently met largely by supplies from Uganda through
humanitarian agencies such as the World Food Programme (WFP) and a
multiplex of both large-scale and small- to medium-scale Uganda-based grain
traders such as the Uganda Grain Traders Association (UGTA), Masindi Seed
and Grain Growers Association (MSGGA), and the Uganda National Farmers
Federation (UNFFE).
In spite of the fact that Ugandas white maize exports in 2015 topped more
than 290,000 Metric Tonnes, this is still not sufficient to cover the big
demand-supply gap for agricultural products in the Republic of South Sudan
in 2016 and the next few years up to a point when the country will be able to
achieve absolute peace and stability that will be conducive for agricultural
production and internal food security. For the next few years therefore, there
is still some considerable to be done in sourcing basic agricultural
commodities from food surplus countries in the region like Uganda to meet
the basic food requirements of the growing population in South Sudan as the
country pacifies and gets back on the route to normalcy.
The market for white maize in South Sudan is therefore quite good in terms
of demand volumes at the moment and is likely to remain so for the next 5
10 years. This present an excellent business opportunity that XYZ
COMPANY can fully grasp and exploit going forward. The best way to make
use of such an excellent business opportunity is for XYZ COMPANY to
secure large white maize exclusive long-term supply contracts with
government food supply agencies or large humanitarian relief organizations
in South Sudan that will present with a unique position to serve these endmarket buyers and their needs.
Profitability in these South Sudan end-markets is expected to be excellent,
especially given the fact that XYZ COMPANY will start off with supplying a
reasonably large volume of 120,000 metric tonnes of white maize per annum
in 2016/17 with profitability increasing steadily over the next few years. We
expect profitability in the co-op end to be much slower in the first five years
of operation, but it too will increase steadily.
Financial Considerations
Start-up assets required include expenses and cash needed to support
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BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN


operations until revenues reach an acceptable level. Most of the company's
liabilities will come from outside private investors and management
investment, however, we shall borrow funds to facilitate the business from
the existing trade finance banks in South Sudan and Uganda which will all
be paid off in five years.
The company expects to reach profitability right from Year 1 and does not
anticipate any serious cash flow problems.
Figure 1: Project Financial Performance Indicators
Financial Highlights
Sales

Gross Profit

Net Profit

80,000,000
70,000,000
60,000,000
50,000,000
40,000,000
30,000,000
20,000,000
10,000,000
0

1.1

Year 1

Year 2

Year 3

Year 4

Year 5

Vision

To be the strongest link between farmers and consumers within the East
African region.
1.2

Mission
To facilitate production of high quality crops
To propagate value addition and
To provide a market for all tradable surplus commodities
To provide consumers with a range of quality yet affordable branded
products.
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BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN

1.3

Objectives

The three year goals for Visigoth Imports are the following:

Achieve break-even by Year 2.


Retain our long-term contracts with local import shops in Leavenworth,
WA, through excellent customer service.
Become the premier importer of grains and cereals in South Sudan,
and become the prime exporter of grains and cereals for the farmers,
processors and traders of Uganda.

BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN


2.0

UGANDA MAIZE SUPPLY AND DEMAND ANALYSIS

Maize was introduced in Uganda in 1861 and has since become a major part
of the farming system, ranking third in importance among the main cereal
crops (finger millet, sorghum and maize) grown in the country (USAID, 2010).
Much of the production of maize aims to supply export markets in the region,
mostly especially Kenya and recently Southern Sudan, which are in chronic
maize deficits. The maize sub-sector is estimated to provide a livelihood for
about 3 million Ugandan farm households, close to 1,000 traders and over 20
exporters (UBoS, 2011). Therefore, maize is a growing source of household
income and foreign exchange through exports. Providing more support to the
maize industry is therefore a key part of Ugandas strategy to strengthen its
positioning in regional and world markets.
2.1

Maize Production
2.1.1 Maize Trends and Projections

Maize is grown predominantly by peasant farmers on a subsistence level,


except for a few emerging commercial farmers. Peasant farmers have land
holdings of between 0.2-0.5 ha under maize production, while the few
medium- to large-scale farmers have 0.8-4.0 ha. Nevertheless, peasant
farmers account for up to 75% of maize production and contribute over 70%
of marketable surplus. Large-scale farmers account for 25%, their share is
growing because of the increased regional demand and structural reforms in
the maize international trade.
Majority of the peasant maize farmers grow a mixed variety of Longe 4 and
Longe 5. Longe 4 is an open pollinated variety of maize developed to be fastmaturing and drought-resistant. Longe 5 is also an open-pollinated variety of
what is described as quality protein maize (QPM). It was developed to be
more nutritious and was initially expected to fetch a higher price on the
market for human and animal feed. However, as it turned out, there was no
evidence of such a premium price being offered to farmers.
Maize production in Uganda is characterized by generally low yields, which
result in high unit costs and low returns. Irrespective of farm sizes, the yield
levels in Uganda are low, standing at 1.0-1.8 MT/ha (4-7 bags [100 kg] per
acre). This is explained by the limited use of agricultural inputs where farms
are managed in a typical traditional system. For example, the only inputs are
family labour and home saved seeds. Such low yields result into high unit
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BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN


costs of production, which have been estimated at UShs 120-180/kg [US$ 6-9
cents] per kg, with gross margins being less than UShs 50,000 [US$ 25.6] per
ha. Moreover, of the estimated 500,000 750,000 MT of maize produced per
annum, 15% is lost through harvest losses and 20% is retained at household
level for consumption and seed (USAID, 2008).
2.1.2 Main Maize Growing Areas
Uganda has ideal conditions for maize production (such as fertile soils, ample
rainfall [annual rainfall of 1,000 mm of which a minimum of 400 mm are
required for the growing season. Because of these good conditions, maize is
widely grown in most parts of the country. The main production areas
include:

Western (Kabale, Masindi, Kasese, and Kabarole districts);

Central (Mubende, Kiboga, Masaka, Mukono, and Rakai districts);

Eastern (Iganga, Kamuli, Bugiri, Mayuge, Sironko, Tororo, Mbale, and


Kapchorwa districts); and

Northern (Arua, Nebbi, Apac, Lira, Kitgum, and Gulu districts).

The concentration of maize in these districts is explained by several factors


including the ethnic nature of the population, the influence of immigrants,
especially from Kenya, and the ready market for dried grains in the vicinity.
The Eastern region accounts for over 50% of annual total output (NRI/IITA,
2002). Countrywide, the area under cultivation varies widely from district to
district, although in recent years, there has been a steady increase, ranging
between 800,000 and 1,000,000 ha (Table 1). Similarly, yields also vary
from district to district depending on the soil and climatic conditions.
However, the overall national yield of maize is estimated to range between
1.40 1.50 tonnes per hectare (MAAIF 2008).
Table 1: Maize Production in Uganda, 2008 2015
Year

2008

2009

2010

2011

2012

2013

2014

Area Harvested (Ha)

840,000

942,000

2,314,90
9

2,354,66
4

1,032,00
0
2,373,50
1

1,063,00
0
2,551,00
0

1,094,00
0
2,734,00
0

1,101,00
0
2,748,00
0

1,103,00
0
2,750,00
0

Volume (MT)

N/A = data not available.


Source: UBOS, 2009

2015
N/A
2,600,00
0

BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN


Maize grows well in areas with annual minimal rainfall of 700 mm. The crop
takes about 4 months from planting to harvest in the low land areas and up
to 8-9 month in the Kapchorwa highlands of Mt. Elgon. The crop has two
seasons. The first season runs from January to March and, the second season
is from July to August. In other districts like Kapchorwa and Mbale, maize
harvests occur between October and December. Some areas can support two
seasons a year, while others can only support one season because of the
insufficient rains or extended length of the growing season.
Maize yields in the above districts differ by agro-ecological zones. Farmers in
potentially high maize-growing areas harvest between 4-6 MT/ha, especially
in Kasese and Kapchorwa districts. In the districts of Iganga/Bugiri, Masindi
and Kasese, open pollinated maize varieties are grown and harvested twice a
year, while in Mbale and Kapchorwa hybrid maize is grown and harvested
once a year. In Kasese the second season is larger than the first season
unlike for the rest of the districts where maize is grown twice a year.
Figure 2: Map of Uganda Illustrating Flow of Maize

BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN


2.2

Domestic Consumption

While maize has been grown for a long time in Uganda, nonetheless, unlike
in neighbouring countries (Kenya, Tanzania, etc.), it does not form a major
part of the populations traditional diet, but is grown primarily for income
generation, rather than for food security. However, the growing cost of
traditional staple foods (such as bananas [Matooke] has had the impact of
increasing maize consumption, especially in urban areas. Kampala alone
accounts for about 50% of formal trade in maize. The domestic market for
maize in Uganda is estimated at 350,000 - 400,000 metric tonnes per annum
(NRI/IITA, 2002). In 2007, domestic consumption remained at 400,000 MT out
of a national availability average of approximately 638,000 MT (USAID,
2008).
The main domestic market for maize is Kampala, which accounts for about
50% of the formal trade. The main buying centre is the Kisenyi market which
has a concentration of processors (about 88 millers). The main domestic
demand for maize is from institutions (schools, prisons, hospitals, etc.). Major
institutional buyers of maize include the World Food Programme (WFP),
which stocks supplies destined for distressed areas both within Uganda and
the region (DRC, Burundi and Rwanda) and the Uganda Grain Traders Limited
(UGT), which is an association of 16 Ugandan major trading companies.
Maize is consumed in various forms grilled or whole, as a cake [Posho, or
Ugali], or as porridge especially in urban centres. Over 70% of the maize is
consumed as food, and about 10% is used as animal feeds (maize bran).
There is also increasing demand of value-added products (maize flour,
poultry feeds, etc) especially in urban centres where maize is gaining
importance both as a major food item and for income generation.
2.3

Marketing and Trade

Ugandas maize export market is mainly regional, comprising of markets


within Eastern and Southern Africa, the Democratic Republic of Congo and
Southern Sudan. Exports of maize to Kenya alone more than doubled from
2004 to 2008 (MAAIF, 2010). Ugandas export potential for maize is
estimated between 200,000 and 250,000 MT per year (USAID, 2010).
Nonetheless, the country has only managed to formally export half of this
amount, reflecting a low level of penetration into the regional markets due to
the poor rural road network, and limited business exposure (USAID, 2010).
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BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN


Maize is sold across borders through Mutukula for Tanzania, Busia for Kenya,
and Gatuna for Rwanda (Figure 1). The challenge for the cross-border trade,
however, has been the increasing informal (unofficial) cross-border trade
with neighboring countries for difficulty of controlling both quantity and
quality of commodity flow. Of all the five neighboring countries, Kenya
dominates the informal export destinations followed by DRC, Southern
Sudan, Rwanda and Tanzania.
There has been a vibrant cross-border trade in maize with these regional
markets. According to USAID (2010), internal procurement and trade in
maize along Ugandas eastern and southern borders with Kenya and Rwanda,
respectively, remains brisk, as high demand for maize in the neighboring
countries increased the follow of maize from production centers in Uganda.
Trade in maize to these markets is entirely informal. Consequently there are
no accurate data on volume and values of exports to these countries.
Official figures indicate that in 2008 alone, maize is estimated to have
generated over USD 18.5 million in export earnings from an estimated
66,671 tons (MAAIF, 2011). Table 2 presents maize production, import and
export of Uganda (2004-2010). The data on exports of maize reported mainly
reflects the formal export. According to this data, Uganda exported 812percent of its maize production between 2004 and 2010. However,
informal (unofficial) maize exports appear to far exceeding the formal
(official) exports through. According to Bank of Uganda (2011), the value of
informal maize grain and flour exports to neighboring countries in 2009 and
2010 were estimated at USD 36.67 and 45.83 million, respectively. In
contrast, the value of formal maize grain exports in the same years were
USD 29.07 and 38.21 million, respectively (MAAIF, 2010).
South Sudan is an important end market for Ugandan maize and to that
extent northern Uganda has a geographical advantage to exploit this market.
However, the region has not yet been able to reap significant benefits from
this market because of low levels of production and a lack of organized
marketing. The post-conflict environment in South Sudan is another risk
factor, especially for Ugandan traders who have often been attacked by
lawless gangs. This is exacerbated by the unclear taxation regime, and most
importantly, by the unclear political future, which depends on a number of
factors.

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BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN

Table 2: Maize production, import and export of Uganda (2008-2015)


Year

2008

2009

2010

2011

2012

2013

2014

Production (MT)

2,314,9
09
22,715

2,354,6
64
6,559

2,373,5
01
1,457

2,551,0
00
N/A

2,734,0
00
N/A

2,748,0
00
N/A

2,868,0
00
N/A

210,155

143,532

Imports (MT)
Formal Exports (MT)

71,699

98,471
151,389

Formal Exports as a % of
Production

3.10%

4.18%

6.38%

93,610

3.67%

141,78
9
7.69%

5.22%

2015
N/A
N/A

290,66
2

4.94%

N/A = data not available.


Source: BOU and UBoS Statistics, 2015

Data obtained from FAOSTAT (2012) indicates that formal imports of maize
have been declining since 2004. The same conclusion is also reported by
USAID (2010). Imports of maize have been high in seasons of low harvest
(e.g., 2004) especially on account of variations in rainfall patterns. By and
large, however, Uganda has always been self-sufficient in maize production
and has not been dependent on imports.

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BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN

3.0

SOUTH SUDAN MARKET SITUATION


3.1

Overview of the Economy

The South Sudanese economy is highly oil-dependent: oil production


represents 99% of exports and 95% of government revenue, and accounted
for around 50% of gross domestic product (GDP) in 2013/2014 (IMF, 2014).
Since the start of the current conflict, oil revenues have plummeted by over
50% compared to the end of 2013.1Together with the decline in crude oil
prices and the fixed costs of using Sudanese oil pipelines, this has had
significant financial and economic repercussions. Foreign reserves reached
an all-time low in mid-2014, and government expenditure on basic services
and development has been severely curtailed; any remaining expenditure is
heavily skewed towards security and the war budget and paying government
salaries (UNDP, 2015). Spending is largely financed through external
borrowing on future oil revenues, putting the future economic health of the
country in serious jeopardy (Frontier Economics, 2015).
The fiscal deficit has led to limited availability of foreign currency and a
depreciating parallel exchange rate. In 2011 the Central Bank of South Sudan
fixed the currency at an inflated level against the US dollar and limited
foreign exchange in what the IMF has termed a hidden transfer of resources
from the government to those with privileged access to foreign exchange at
the official rate (IMF, 2014). Since the start of the current crisis, the gap
between the official and unofficial exchange rates has widened significantly
(see the figure below). As a large amount of informal cross-border trade is
financed at the black market rate, it is increasingly difficult for all but a few
traders with good connections to bring goods into the country. The conflict
and the widening gap between the two exchange rates have meant that the
group receiving privileged access has changed and the profits that can be
made on currency differentials has grown, further discouraging commodity
trade and favouring exchange rate trade (see Section 5; Radio Tamazuj,
2015a). However, declining oil revenue and the increasing shortage of
currency reserves are threatening the continuity of these patronage
networks.
1Oil production fell to 160,000 barrels per day in 2014 from more than 235,000
barrels per day at the end of 2013 (IMF, 2014).
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BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN

Figure 3: Official and Black Market Exchange Rates

3.2

Agricultural Production

Other sectors of the economy aside from oil, such as agriculture and
livestock production, are not yet sufficiently developed to compensate for
the significant reduction in oil exports. Livestock, especially larger animals
such as cows, are generally kept as assets given the high social value they
have among pastoralists, rather than reared specifically for export. Small
ruminants such as goat and sheep are a key income source for pastoralists
and determine their ability to buy staple food in the market.
The potential for agricultural production in South Sudan is huge. Half of the
countrys 82m hectares of agricultural land is suitable for agricultural
production, yet only 4.5% is routinely under cultivation (Annual Needs and
Livelihoods Assessment, 2012/2013). Yields are low, with the average across
all cereals generally below one ton per hectare (Oxfam, 2014). The country
has only been self-sufficient in cereal production twice in the last decade;
overall food production fell from 954,000 tonnes in 2012 to 900,000 tonnes
in 2013 and 891,000 tonnes in 2014 (FAO/WFP 2014). This was against an
estimated total demand of 1.3m tonnes in 2013/14, giving an overall deficit
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BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN


of 408,000 tonnes. Only one state Western Equatoria was in surplus. Lack
of productivity is compounded by poverty, limiting investment in inputs and
equipment, the effects of decades of conflict and insecurity and insufficient
investment in rural infrastructure (roads, markets, post-harvest storage
facilities). South Sudan is also suffering increasingly from natural disasters,
including floods, droughts and epidemics of livestock disease (WFP et al.,
2012).
Sorghum, the main staple crop, is cultivated by 68% of households. Maize is
grown by around 44% of households; 33% grow groundnuts and 13%
cassava (NBS, 2012). Just under three-quarters of households own livestock:
69% own goats, 63% cattle, 57% poultry and 38% sheep (including
households that own more than one of these) (NBS, 2012). In Unity and
Jonglei states, the majority of households also derive an income from the
sale of charcoal, firewood and grass.
Per capita consumption of cereals is estimated at between 109kg and 150kg
per year (FAO/WFP, 2014), and the average household size is approximately
seven. Typically, over 40% of South Sudanese households spend more than
65% of their income on food. With the exceptions of Central and West
Equatoria, markets are the main source of staple foods (apart from around
harvest time in October), with up to 70% of households relying entirely on
markets for their sorghum consumption during the lean season. Other key
food items, such as meat, fish, sugar, fats and oils, are also mainly sourced
in markets (WFP, 2014a).
Households most vulnerable to food insecurity before the onset of the crisis
were those that did not produce their own sorghum, spent a large share of
their income on food, did own livestock and were in states most affected by
the disruption of trade patterns: North Bahr el Ghazal, Warrap, Unity, Upper
Nile and Jonglei. Households like these were already using a number of
coping strategies prior to the crisis. For these households, the single biggest
shock factor recorded pre-crisis was food price increases (FAO/ WFP, 2014).
The states most affected by the current conflict Jonglei, Upper Nile and
Unity had the highest proportion of market-reliant households before the
crisis in 2013, and households in these states spent the highest proportion of
their income on food: 63% in Jonglei and 59% in Unity spent over 65% of
their income on food between 2011 and 2013 (WFP, 2014a). These states
also had the highest cereal deficits in the country Jonglei alone accounted
for morethan 30% of the national cereal deficit, with Unity and Upper Nile
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BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN


together adding another 32% (ibid.). Poor yields for cereals also affected the
terms of trade for livestock, sheep and goats. Many traders rely on selling
their herd to restock their stores. If there is no off-take market, or the quality
of the herd deteriorates due to disease, lack of animal health workers or vets
or lack of access to adequate grazing land due to insecurity, traders get less
favourable terms of trade and are less willing to restock.
According to WFPs data on cumulative food aid distributions from January to
October 2014, Jonglei, Upper Nile and Unity also received the most food aid.
Warrap and Lakes states also recorded high food aid distributions (WFP,
2015).
Table 3: Cereal food distributions (thousands of tons) by state

State
Central Equatoria
Eastern Equatoria
Western Equatoria
Jonglei
Upper Nile
Unity
Lakes
Warrap
W. Bahr-el-Ghazal
N. Bahr-el-Ghazal
South Sudan Total
Source: WFP (2015)
3.3

2012

2013

2014

4
6
2
24
21
12
5
19
6
13
112

4
4
3
10
32
19
5
25
6
11
119

9
4
3
24
25
25
14
21
4
7
136

Key Features of the Juba Market

Juba is the key trading and import hub for much of the country, in particular
for goods using the Kampala Nimule Juba corridor. There are four key
markets: KonyoKonyo, Customs, Jebel and Souq Lybia, as well as various
smaller or medium-sized neighbourhood markets. Konyo Konyo (North and
South) is the largest market in the region, the main hub for imports from
neighbouring countries and the primary point of origin for market supplies
throughout South Sudan. Imports from Uganda come directly to Konyo
Konyo, Jebel and Customs markets, and traders in Customs and Jebel also
buy from Konyo Konyo. Souq Lybia does not receive imports directly, so its
traders buy goods from one of the other three markets (see the figure
below). According to interviews, people prefer to buy from Konyo Konyo
market because of the wider range of goods available compared to other
markets. Konyo Konyo is not necessarily cheaper, except for maize and
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BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN


sorghum. Most traders buying goods to transport to other South Sudanese
states further north also come to Konyo Konyo to buy. Local produce is sold in
all markets, though Customs in particular has a number of streets dedicated
solely to local produce.
Jubas markets are marked by impermanence and low levels of investment,
as traders are keen to retain the ability to leave quickly should security
deteriorate. Many come to make a quick profit, and hence do not invest in
permanent structures such as storage capacity or shops. There is also a lack
of regulation and control, and many foreign and to a lesser extent local
first-time business people arrive in Juba with little money and are simply
trying their luck. Goods may not be as advertised on the packaging a 50kg
bag of maize may in fact only contain 45kg, or the quality may be lower than
claimed and informal tax collection and bribery is common, in addition to
official set fees for services such as policing and garbage disposal.
Figure 4: Juba Markets
Local produce from
Juba and surrounding
islands

Imports from Uganda


Konyo Konyo
Market

Jebel

Customs

Souq Libya

Local produce from


Magwi, Yei and Maridi

Terekeka

Sells to
Buys from

3.4

Trade Flows
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BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN


3.4.1 Imports
The scale of imports (both formal and informal) into South Sudan is difficult
to estimate as accurate data is unavailable. Staple food commodities in
particular are largely traded informally across borders. Over the past four
years annual import requirements have fluctuated between 350,000 and
500,000 tonnes (WFP, 2015). South Sudan is the main informal staple food
importer in East Africa, accounting for 57% of total informal imports (FSNWG,
2014a). In 2013, before the current conflict, South Sudan imported around
1.85m tonnes of staple food informally, with maize (360,890 tonnes of maize
grain and 221,643 tonnes of maize flour) and sorghum (317,114 tonnes)
accounting for the highest proportion (WFP, 2015).
Most imports into South Sudan come from Uganda and, to a lesser degree,
Sudan. Smaller amounts come from Ethiopia and Kenya (via Kapoeta) to the
eastern areas of Jonglei, Eastern Equatoria and Upper Nile states (ACAPS,
2014). South Sudans main trade routes go through Nimule or Kaya, Central
Equatoria and then up along the Jonglei/Lakes border via Rumbek, supplying
Greater Bahr el Ghazal or Unity State by road or barge (depending on the
season), or via Bor, reaching Upper Nile State.
Around 54% of Ugandas total maize exports went to South Sudan in 2013
(FSNWG, 2014a). Uganda also exports most of its sorghum to South Sudan.
Previously, South Sudan, particularly northern areas, also relied on imports
from Sudan. In 2010, an estimated 80,000 tonnes of staple foods such as
sorghum, wheat flour, millet and wheat were imported from Sudan (Annual
Needs and Livelihoods Assessment, 2011/2012). However, the closure of the
border in May 2011 has greatly reduced this trade. Informal trade continues,
in particular near Aweil and Renk, but figures are difficult to come by as trade
is dispersed along the border to circumvent the ban, and so difficult to
monitor (FSNWG, 2014). Interviews for this study suggest that informal taxes
paid at border crossing points are high, making trade very expensive. EMMAs
by MercyCorp (2015a; 2015b) highlight the exodus of many Darfurian traders
from rural markets in the area, disrupting informal trade networks along the
northern border. FSNWG (2014a) reports anecdotal evidence that white
sorghum from Sudan is increasingly being replaced by the cheaper local and
imported red sorghum, maize and maize flour from Uganda. Northern towns
such as Aweil, Bentiu and Malakal used to be oriented towards Sudan for
their imports, while also receiving goods from Juba and Wau (in the case of
Aweil and Agok), Bor, Wau, Rumbek and Juba. Towns in the southern half of
17

BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN


South Sudan are more oriented towards imports from Uganda. Although Juba
continues to receive imports from Sudan (in particular wheat and sorghum,
as well as spices and sauces), traders interviewed for this study estimated
that they got about 15% of their wheat and sorghum from Khartoum, and
85% from Uganda.
3.4.2 Local Procurement
Domestic production makes up 10%15% of the total supply in Jubas
markets. In Konyo Konyo, much of this consists of local fruits and vegetables,
such as okra, bamia, kudra and tomatoes, grown on the islands and in the
outskirts of Juba and sold by local women in small quantities. Some traders
specialize in the sale of local produce in Customs market, where a whole
street is dedicated to the sale of South Sudanese maize, sorghum, simsim
and groundnuts. Many of these traders either only procure locally, or buy
locally seasonally, importing produce the rest of the year when local supplies
are unavailable. Much of this local produce comes from Greater Equatoria
Eastern, Central and Western Equatoria. Traders reported that they would
rent cars from Juba and drive to Yei, Morobo, Maridi or Magwi to buy from
producers locally. Producers themselves generally do not have the means,
knowledge or connections to travel up to Juba to sell their produce, instead
transporting their products to the nearest market by bicycle or donkey cart.
Traders mentioned that many residents prefer to buy local food, which is
generally grown without the use of fertilisers.
Before the start of the conflict, the main local source of sorghum was Renk,
the only large-scale mechanised farm in South Sudan. However, production
in 2012 was already half what it had been previously because of the
departure of the Sudanese who made up three-quarters of the workforce.
Most of Renks sorghum production was destined for Sudan, but some of it
also fed the Greater Upper Nile area and Juba markets. Several large traders
interviewed mentioned that they used to regularly go to Renk to buy
sorghum, as often as once or twice a month, bringing back around 500
1,000 bags each trip.

18

BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN


Figure 5: Typical Maize Flows in South Sudan

3.5

Market Composition

Most traders on Jubas markets import the majority of their goods from
Uganda. Exact figures are difficult to come by, but estimates suggest that
imports account for 85%90% of total supply in Konyo Konyo market (WFP,
2015). It is not only wholesalers who import goods: retailers, even smaller
ones, also do at times. The decision on whether to import or buy locally is
heavily influenced by the exchange rate and the availability of, and traders
access to, foreign currency.
The figure above summarizes the various entry points into the grain market.
Traders who buy from Uganda either make the trip there themselves or send
a close relative or business partner. Some have a South Sudanese or
Ugandan associate based permanently in Uganda who will source the goods
locally and load them on a truck bound for South Sudan. Many of the larger
traders buy directly from the two or three large grain traders/processers
based in Kampala. These large traders source grains from all over Uganda,
as well as having grinding and processing capacity in their factories in
Kampala. Smaller traders buying in Uganda often source cereals themselves,
19

BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN


and may travel to different regions, such as Hoima, Jinja, Kiryandongo and
Gulu, to collect cereals directly from farmers. Even smaller retailers
interviewed, who sold from jerricans or cups, said that they would get
together with others and import cereals from Uganda. They preferred to buy
in Uganda mainly for quality reasons, and often travelled shorter distances
than larger traders mainly to Gulu or other places in Northern Uganda close
to the South Sudanese border.
Those not importing themselves buy from two types of trader/transporter in
Juba: those with trucks, who sell their imported produce directly off the back
of the vehicle, and those who own stores. Off-the-truck selling generally
takes place in North Konyo Konyo; depending on demand and season,
between one and five trucks may be trading at any one time. South Konyo
Konyo hosts traders with more permanent stores (usually 8 metres by 5
metres in size). Previous studies have shown that these traders/transporters
are mostly independent and based in South Sudan, not Ugandan grain
processors, who prefer not to travel to South Sudan themselves due to high
import duties and taxes and harassment on the road (WFP, 2012).
Middlemen may also become involved in some of these transactions,
bringing traders to particular stores for a 2 SSP/bag commission.
Wholesalers sell their produce to other wholesalers (especially if they are
importers), but also to retailers and individual customers from Juba and
surroundings. Retailers tend to sell to smaller shops and individual customers
in Juba. Large amounts of goods (sorghum, maize, maize flour) are also sold
to traders from states upcountry (Greater Bahr-el-Ghazal, Greater Upper
Nile). Volumes are difficult to estimate and vary seasonally, but one recent
market assessment suggested that upcountry trade may have accounted for
as much as 60%70% of traders business prior to the conflict (Oxfam, 2014).
During the dry season traders arrive with their trucks from Bor, Rumbek, Wau
and Malakal; during the rainy season only a few roads (Bor, Rumbek,
Wau/Aweil) remain passable, and large barges take most of the goods north
towards Bor, Malakal and Bentiu. Traders said that upcountry traders can buy
between 50 and 500 bags from individual shops, combining different
commodities from different stores to fill one truck. They may visit a particular
shop as often as once or twice a month.
The South Sudanese market is dominated by foreign traders, with only
around 15% of South Sudanese origin. Most are Darfuri, Somali, Eritrean,
Ethiopian or Ugandan. While some are individual businesspeople, many of
the Eritrean, Somali and Ethiopian businesses in South Sudan are branches
20

BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN


or subsidiaries of larger companies based elsewhere. While many of the
small and medium-sized traders import only foodstuffs, several of the larger
traders and companies combine food imports with other, more lucrative
businesses, such as hotels and petroleum importing (especially Somalis).
Most Ugandan businesses are small or medium-sized, unregistered food
traders. South Sudanese retailers, in particular female traders, had started to
increase before the crisis, mainly selling local fruits and vegetables. There
are also a few (1015) large-scale South Sudanese traders involved in
foodstuffs and other goods.
While it is difficult to say how many large operators there are in the sorghum
and maize trade, given that many traders import other goods as well (and a
large trader overall may not be big in sorghum or maize), estimates can be
made. Although a few very large companies have capital of over $10m, most
companies registered with the Chamber of Commerce have capital of
50,00015m SSP (around $8,000 $250,000). The Chamber has 6,000
members, around half of which deal in food items. Of these, there are around
20 large traders, 2,000 medium ones and 1,000 smaller ones. According to
the Chamber of Commerce, three-quarters of the companies registered with
it are partnerships between foreigners and a local shareholder. The local
shareholder is rarely a businessman or provides any capital, but simply offers
an entry point into the local market and establishes useful connections.
Chamber of Commerce figures only concern registered companies, and many
traders are not willing to register for financial and bureaucratic reasons. Most
informal traders are small- or medium-scale. Medium-sized traders typically
bring to the market between 1,000 and 2,000 bags of maize a month. Large
traders bring in 2,500 bags or more, with the bigger ones often bringing in as
many as 4,000 bags around 34 times per month; others also bring in fuel
(up to four trucks a week before the crisis). They often own several stores of
around 3,000 bags each. Small-scale traders usually sell by jerrican or cup
and, if they do import, bring in around 50100 bags a month.
According to Fewsnet (2009, cited in WFP, 2012), the sorghum market is
relatively concentrated, with 12% of the largest traders handling 70% of the
trade. Even before the conflict there was not much of a sorghum market in
Juba for local consumption. People in Juba and the Equatorias have generally
shifted consumption patterns, preferring maize to sorghum, or consuming
sorghum, wheat and maize together. In Juba, sorghum was mainly used for
alcohol brewing before the government demolished the informal market in
2012. Traders reported that they were selling around 500 bags a day to local
21

BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN


brewers, but since the demolition demand has declined significantly. Much of
the sorghum traded in Juba and imported from Uganda is destined for trade
upcountry.
Figure 6: Supply Chain for Grain Imports from Uganda to Juba
Farmers in Northern
Uganda (Gulu and
close to South Sudan
border)

Ugandan
Farmers: Hoima,
Kiryandongo and Jinja

Pooled or
individual
truck

Processors:
Uganda

Pooled trucks

Individual
truck

Buys when doesnt have


currency

Wholesalers (Juba)

Wholesalers (Juba:
dont import)

Trader/transporter
(mobile)

Small Wholesalers
(Juba)

Retailers (Juba:
dont import)

Traders from the states (Unity, Upper Nile and Jonglei)


22

Retailer (Juba)

Consumers

BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN


3.6

Transport

Trucks normally carry either 15 tons or 25 tons, and traders may load a
combination of different cereals and other items on a single truck. Rental
prices reported by traders were around 7m Ugandan Shillings ($2,000) for a
25-ton truck and around 4m Shillings for a 15-ton truck. Trucks are generally
hired in Kampala and operate independently of traders, though some may
also have their own trucks. Transporters in Juba who take produce upcountry
also operate independently. Checkpoints along the roads (both formal and
informal) are a major factor driving up the price of goods. A study by the
National Bureau of Statistics (NBS, 2011) found six checkpoints between Juba
and Nimule, 32 between Juba and Aweil, 24 between Juba and Wau and nine
between Wau and Aweil, with varying amounts of payment demanded at
each. This study found reports of numerous checkpoints between Kampala
and Juba, with traders having to pay between 100 and 200 SSP at each
unofficial checkpoint and and 200300 SSP at Nesitu.
3.7

Terms of Trade

Staple food markets operate on both credit and cash. Almost all traders
access credit on an informal basis, rather than through formal channels such
as banks or other financial institutions. Credit arrangements are often inkind, where a trader receives the goods but only has to pay for them after
selling them and collecting the profits, normally a couple of weeks later.
Credit also depends heavily on the connections individual traders have with
other traders or processors/producers. For example, several traders reported
that they knew large maize processors in Uganda well and did not have to
pay in advance for their goods, but paid once they had sold their stock.
Others mentioned that they always had to pay upfront because they did not
have the same personal contacts.
3.8

Prices

Food prices in South Sudan have been highly volatile since independence in
2011. There are enormous price differences between different markets due
to weak market integration across the country, mainly down to poor roads,
expensive fuel, illegal checkpoints and taxes and unfavourable exchange
rates (Special Focus Report, 2014). Generally, the further from an import
point (Uganda, Sudan, Ethiopia) the less integrated markets become, and the
more likely it is that prices will be higher (WFP, 2015). WFP price monitoring
23

BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN


for maize grain in Juba between 2010 and 2014 suggests that they closely
follow prices in Ugandan markets. There seems to be little seasonal variation
in prices for either maize or sorghum in Juba and Bor, reflecting both towns
strong reliance on, and good connections with, import markets in Uganda
(WFP, 2015).
While overall prices for sorghum and maize seem to be less volatile in Juba
than in other South Sudanese markets, prices do vary significantly from
trader to trader because they depend entirely on the import channel traders
used, the prices traders bought at, the amount of formal and informal taxes
they paid and, most importantly, the exchange rate at which the trader
converted his South Sudanese Pounds into US dollars in order to import the
goods. Traders explained that, while goods were cheaper in Uganda, after
transport, taxes and storage they cost in effect almost the same as they
would have done had they been bought in South Sudan. Interviews suggest
the main profit traders made before the conflict was from the exchange rate
differential, rather than the price differential from buying goods cheaply in
Uganda. Traders with larger storage capacity are at an advantage because
they can wait out exchange rate fluctuations and time their restocking to
coincide with favourable rates, maximizing their profit.
Figure 7: Maize Grain Price Evolution in Juba and Gulu

24

BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN


4.0

BUSINESS MODEL

It is important for companies to select an appropriate business model


sequentially to find a clear road map for their future plans. There are
different types of models which companies can adopt according to their own
needs.
Following is the model Canvas model which XYZ COMPANY will adopt to run
business operations.
Figure 8: XYZ COMPANY Business Model
The Business Model Canvas
Key Partners

Key Activities

Value
Propositions

Import-export
companies
SMEs
and
business owners

Consultation

Unique products

Import-Export of
products

Cost efficiency
High quality

24-7
Services

Online

Key Resources

Channels

Finances

Internet
Marketing
Word-of-mouth

Industry specific
expertise

Cost Structure
Travelling
Initial packaging of products
Licences

4.1

Customer
Relationships

Customer
Segments
ImportersExporters
SMEs

Personal
contacts
Revenue Streams
Advanced Partial payments
Online payments

Customer Segments

The customers of XYZ COMPANY would be the importers and exporters and
small and medium size companies in South Sudan which are engage in the
process of growth and expansion. The entrepreneur will engage them by
offering different products and services so to create his own market niche.

4.2

Value Propositions
25

BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN


The products (maize grains) are unique in a way that in the current market
situation there are no other businesses which are doing large volume trading
of maize grain in South Sudan on a regular and consistent supply basis. Thus
it will give an edge to the entrepreneur to compete in the market by offering
those products with high quality and lower rate.
4.3

Channels

Newspapers, TVs, FM radio stations, and social media marketing and other
internet marketing tools will be the core source for XYZ COMPANY to
convey her message to its target audience. Other sources such as word of
mouth, referrals and personal contacts would be secondary source.
4.4

Customer Relationships

In order to maintain and retain customer relationship the entrepreneur will


provide 24-7 online services in order to communicate with his customers.
4.5

Revenue Streams

Due to the nature and type of business, there are generally two different
types of revenue streams such as Advance partial payments which will be
paid at the time of order and other will be bank transfers method (using
documentary letters of credit) partially before and after the sale or purchase
of products and services.
4.6

Key Activities

XYZ COMPANY will be engaged in two major activities, consultation and the
sale and purchase of in demand products (maize grains).
4.7

Key Resources

The key resource for the business are the finances it owes to run its
operations. These resources will be utilized to meet daily expenses and to
buy different products.
4.8

Key Partnerships

26

BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN


XYZ COMPANY will also make efforts to create partnerships or represent
other businesses in each country (South Sudan and Uganda). The partners
will be from the same industry i.e. importers-exporters or other SMEs
involved in international trade.
4.9

Cost Structure

The main cost of the business that will be incurred is the purchase of
products (maize grains). Also road transportation is another key cost as the
entrepreneur will carry out business operations with different transportation
companies located in Uganda, Kenya, and South Sudan to move the
agricultural products.
Figure 9: Projected Sales Map
Sales
Maize Grain

Consultation

Warehousing

Other Services

Figure 9, above shows the projected sales of the company. The major
source of income would be maize grain and consultation to other companies.
The company also intends to provide other services such as market surveys,
purchasing contracts, warehousing, transportation, and follow up service
analysis.

4.10 Key Success Factors


27

BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN


XYZ COMPANY's keys to long-term and profitability are as follows:

Differentiate our services to our niche clients so that they realize that
we are better able to serve their needs than a more generic
competitor.
Keeping close contact with clients and establishing a well-functioning
long-term relationship with them to generate repeat business and
create a top notch reputation.
Establish a comprehensive service experience for our clients/customers
that includes consultation, product/client search, purchasing contracts,
warehousing, transportation, cereals delivery, and follow up service
analysis.
4.11 The Business Process

XYZ COMPANY shall be a Small and Medium size enterprise. It aims at


becoming one of East Africas leading maize originators and marketers. The
company will trade in white maize (primarily for human consumption) and
yellow maize (for stock feed). The companys primary countries of origination
and operation will be Uganda and South Sudan initially, but will later on be
expanded to cover Kenya, Rwanda, and Tanzania. XYZ COMPANY will
conduct its maize origination and marketing by establishing close ties with
thousands of small farmers, maize traders and processors. While individual
maize growers may not earn sufficient income to transfer their product to
central markets, the combined output of 1,000 smallholder maize growers or
more will create significant scale for XYZ COMPANYs strategically
positioned warehouses, which will reach into the remotest of rural regions.
4.12 Strategy
XYZ COMPANY shall create a customer based management system (CRM)
for the existing customers in one computer by using a Microsoft access
program. It shall also form alliances with large warehouse operators in Juba
and other large cities in South Sudan that it can use as first maize grain
reception storage and distribution centres for the first six (6) months of the
projects at discounted warehousing rates. Furthermore, the founding
entrepreneurs of XYZ COMPANY are convinced that this company will also
go a long way to boast the South Sudanese economy in the agricultural
trading section of the company as the company tax will be used to develop
28

BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN


the community and its presence will serve as a catalyst for other business
opportunities to be transformed into full fleshed businesses.
More so the founding entrepreneurs are very ready to start up this business
and have already done some research on how much it is going cost to start
up the business of importing maize grain into the South Sudan market.
Hence all that is needed is the money to start up the business and purchase
of the required maize grains from Uganda.

ORIGIN COUNTRIES | FARM GATE


Figure 10: Maize Origination and Marketing
29
Process I

BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN


Origination

Processin
g

Exportin
g

Shipping &
Logistics

Importing

Distributio
n

Processin
g

FARM GATE

Procurement & Distribution


Centre

30

Marketing

BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN


Sells fertilizer,
farming equipment
and seed

Purchases
commodities directly
from farm gate

National Distribution Centre

Regional/International Distribution
Centre

THIRD PARTY
Or two-directional supply chain
allows us to move products
forwards and backwards through
our procurement and distribution
network

Figure 11: Maize Origination and Marketing


Process II
5.0 OPERATIONS PLAN
5.1

Current Status

XYZ COMPANY
(month) 2015 to
South Sudan. In
the2016 season,

is a newly established company, registered in ----------meet the inherent huge maize demand in the Republic of
order to import and distribute quality maize grain during
XYZ COMPANY will erect a maize cleaning and pre-export
31

BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN


packaging machinery with warehousing infrastructure in Uganda as well as
an import warehouse in South Sudan for use as a reception and distribution
point for the imported maize grain during the 14months following funding.
XYZ COMPANY has completed detailed financial, operational and business
startup planning.
Post funding, XYZ COMPANY is ready to proceed with the following startup
activities:

Erection of export storage warehouse and machinery building, ordering


maize grain cleaning and bagging machinery and equipment
Securing contracts for raw material (maize grain) procurement
Installation of electricity and maize pre-export cleaning mill
Maize export operations
5.2

Startup Costs

There are several start-up costs that are due to infrastructure development
and initial operating costs. These costs are one-time expenditures totaling
US$ 4,500,000 and include:

US$ 75,000 - The maize pre-export cleaning mill


US$ 500,000 - Buildings to house the maize pre-export cleaning facility and
cleaned maize grain
US$ 200,000 - Storage buildings for pre-processed maize
US$ 20,000 - Pest control equipment
US$ 30,000 Miscellaneous equipment (including electricity generator)
US$ 25,000 Electricity lines and transformer
US$ 50,000 Field vehicles
US$ 100,000 Pre-operational Expenses
US$ 3,500,000 - Startup Working Capital (covering 1 months maize
transaction costs + operating expenses)
(All costs include labor, transportation, and fees where appropriate)

5.3

Workforce

Post start-up, during normal operation the maize pre-export cleaning facility
will require 10 to 15 laborers respectively during the off and peak seasons to
run at capacity. The XYZ COMPANY partners will manage and oversee the
day-to-day operations including operations management and financial
management. Operations management will consist of overseeing maize preexport cleaning and packaging operations, labour, maintenance, quality
control and product delivery. Financial management will consist of sales,
32

BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN


marketing and administration. Workers will be trained on location and will be
responsible for running the mill.
5.4

Business Capacity

The maize pre-export cleaning facility will have a throughput capacity of 50 100 tons of maize per hour. The down time on a mill is about 15% with 10%
idle time. A six-hour milling period will result in roughly 400 - 450 tons of
export-grade maize grains per day.

6.0

MARKETING PLAN

The marketing strategy is to create a market niche that focuses primarily on


the customers involved in import/export business. To meet the required goals
XYZ COMPANY will develop a creative online presence by building a
dynamic website and placing the complete profile of products and services
and necessary information to connect with its customers. Further the
company will invest and utilize modern practices to advertise it using
broadcast and print media as well as social media campaigns and will
maintain its presence inside newspapers, TV stations, FM radio stations,
33

BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN


online directories and other search engines sequentially by using modern
marketing techniques to make a clear presence of the company on the
internet.
XYZ COMPANY will establish business relationships with wholesalers,
retailers, and distributors both domestically and internationally. The author
has extensive experience and already business contacts within the industry,
he will draw on these existing relationships to build a network of brokers that
source products on behalf of the company. For successive sales and profit
results, the company will apply marketing strategies including frequent social
media campaigns and other advertisement platforms, such as through
personal contacts, print and media and by maintaining public relations.
Moreover XYZ COMPANY, is also intended to build partnerships with other
companies in order create a network of importers and exporters.

7.0

FINANCIALS

Financing is a core business element and without a proper financial


management a business cannot be created. It intends to provide information
how much finances are needed to run business. The figures used can further
be used in calculating several other statements such as sales and gross
profit margin etc. The financial section is also necessary if the business is
seeking loans or outside investment. These statements provide a clear
picture of the business as where it is standing financially or is it wise to
34

BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN


invest in to the business. Following is the projected financial plan for the case
company.
From first sight, the proposed maize export/import trading business venture
is very rewarding and the road transportation company to be used is very
reliable. XYZ COMPANY apart from being a new business venture will also
be serving as a source of employment for the owners and therefore they
shall have job security and self-satisfaction from its success. The financial
forecast (projection) of XYZ COMPANY shows that it will make profit by the
end of the first year and is able to pay back its loan within four (5) years and
there after yield dividends to its owners.
In comparison to other business models a maize export trading financial
model is relatively straight forward. Maize is purchased, and maize is sold.
XYZ COMPANY will be able to sell 100% of its product at wholesale.
7.1

Capital Requirements

Table 4 below provides an outline depiction of the start-up capital


requirements for activating the XYZ COMPANYs white maize grain
export/import trading enterprise.

Table 4: Start-Up Capital Requirement Budget


Sr.
Item Description
Amount
No.
(US$)
1
Maize
cleaning
&
bagging
75,000
equipment
2
Export warehouses
500,000
3
Sourcing warehouse
200,000
4
Pest-control equipment
20,000
5
Miscellaneous equipment
30,000
35

BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN


6
7
8
9
10.
NB: (All

Electricity lines and transformer


25,000
Field vehicles
50,000
Pre-operational Expenses
100,000
Start-Up Working Capital
3,500,000
TOTAL
4,500,000
costs include labor, transportation, and fees where appropriate)

Startup costs total US$ 4,500,000. Capital going towards capital inventory is
US$ 1,000,000 including pre-operating expenses of US$ 100,000. Initial
working capital to finance one (1) months cost of goods and other related
transaction costs is estimated at US$ 3,500,000. Monthly gross sales are
estimated at US$ 4,200,000 for the first year with an annual growth rate of
5%. The assumption used in calculating monthly sales revenues is that XYZ
COMPANY will be selling 10,000 metric tonnes of white maize grain at a rate
of US$ 420 per metric tonne CIF Juba in South Sudan.
The pre-opening expense of US$ 100,000 is made up of fixtures & fittings,
office vehicles, computer equipment and other office needs.
The founding entrepreneurs of XYZ COMPANY are able and willing to
contribute US$ 500,000 in form of preference shares towards the maize
trading projects start-up capital budget. The balance of US$ 4,000,000 of
the start-up capital budget shall be raised from a trade investment bank
source or as equity finance angel investor as a 5-year loan carrying an
interest rate of 20% per annum.
7.2

Income Expenditure and Cash Flow statement

The forecasts in Table 7 below shows that the business will be profitable by
the end of the first year income expenditure and cash flow statement but
considering the fact that US$ 4,000,000 of the money for the business will be
from loan, which shall be paid at the end of each financial year, BEFCO shall
have a negative cash flow at end first year of CFA 950,000 francs. The
profitability trend continues throughout the business projection period and
this is expected to leverage the maize export/import trading business
venture to enable it complete payment of the bank loan by the end of the
fifth year and make a positive cash flow of US$ 16,399,146.
As the entire industry is mostly a cash industry, XYZ COMPANY will pay all
accounts in cash never carrying any debt. XYZ COMPANY also expects all
sales except for a few large accounts to be cash. These accounts will be net
30 days.
36

BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN


The financial model has been formatted to align with the annual agricultural
season with the start of the year in June and ending in February. XYZ
COMPANY is further anticipating being able to sell virtually all inventory
prior to new acquisitions in successive new years.
Table 5 shows monthly cost of goods sold and maize export transaction
costs while Table 6 shows monthly and annual operating expenses that are
used as the basis for working the income expenditure and cash flow
statement depicted in Table 7.
Table 5: Maize Export Transaction Costs
Item Description
Tertiary Market Price (TMP)
Bagging materials
Labour
costs
(loading,
sorting,
unloading/weighing costs)
Drying
Fumigation
Pre-export
cleaning
&
bagging
Stacking
Re-clean after Fumigation
Re-weighing
Transport
to
Final
Destination
Storage
(warehousing
costs)
Losses
Total

Unit Cost
(UShs/kg)
600

Cost - 10k
MT (US$)
1,764,706

20
20

Cost - 10k
MT (UShs)
6,000,000,00
0
200,000,000
200,000,000

10
20
50

100,000,000
200,000,000
500,000,000

29,412
58,824
147,059

50
20
10
270

500,000,000
200,000,000
100,000,000
2,700,000,00
0
500,000,000

147,059
58,824
29,412
794,118

200,000,000
11,400,000,
000

58,824
3,352,941

50
20
1,140

Table 6: Monthly and Annual Operating Expenses


Operating Expense
Transaction Costs (less
COGS)
Rent

Monthly
(USD)
1,588,235

Annual
(USD)
19,058,820

10,000

120,000

37

58,824
58,824

147,059

BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN


Labour
Utilities
Fuel & Oil
General & Administrative
Sales & Marketing
Overhead Costs
Insurance
Consumables
Miscellaneous &
contingencies
Depreciation
Total Opex

15,000
6,000
5,000
12,000
30,000
10,000
42,000
4,000
10,000

180,000
72,000
60,000
144,000
360,000
120,000
504,000
48,000
120,000

5,000
1,737,235

60,000
20,846,820

38

BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN


Table 7-1: White Maize Export/Import 1-Year Net Income Statement (In USD)
ITEM/MONTH
Maize Tonnage

1
10,000

2
10,000

3
10,000

4
10,000

5
10,000

6
10,000

7
10,000

8
10,000

9
10,000

10
10,000

11
10,000

12
10,000

998,060

1,696,12
0

2,394,18
0

3,092,24
0

3,790,30
0

4,488,36
0

5,186,42
0

5,884,48
0

6,582,54
0

7,280,60
0

7,978,66
0

8,676,720

0
4,500,0
00

0
0
4,200,00
0
5,198,0
60

0
0
4,200,00
0
5,896,1
20

0
0
4,200,00
0
6,594,1
80

0
0
4,200,00
0
7,292,2
40

0
0
4,200,00
0
7,990,3
00

0
0
4,200,00
0
8,688,3
60

0
0
4,200,00
0
9,386,4
20

0
0
4,200,00
0
10,084,4
80

0
0
4,200,00
0
10,782,5
40

0
0
4,200,00
0
11,480,6
00

0
0
4,200,00
0
12,178,6
60

4,200,000
12,876,7
20

1,764,70
5
2,735,2
95

1,764,70
5
3,433,3
55

1,764,70
5
4,131,4
15

1,764,70
5
4,829,4
75

1,764,70
5
5,527,5
35

1,764,70
5
6,225,5
95

1,764,70
5
6,923,6
55

1,764,70
5
7,621,7
15

1,764,70
5
8,319,77
5

1,764,70
5
9,017,83
5

1,764,70
5
9,715,89
5

1,764,70
5
10,413,9
55

0
12,876,7
20

1,588,23
5
10,000
15,000
6,000
5,000
12,000
30,000
10,000
42,000
4,000
10,000
5,000
1,737,2
35
998,06
0
0
998,06
0
0
998,06
0
0
998,06

1,588,23
5
10,000
15,000
6,000
5,000
12,000
30,000
10,000
42,000
4,000
10,000
5,000
1,737,2
35
1,696,1
20
0
1,696,1
20
0
1,696,1
20
0
1,696,1

1,588,23
5
10,000
15,000
6,000
5,000
12,000
30,000
10,000
42,000
4,000
10,000
5,000
1,737,2
35
2,394,1
80
0
2,394,1
80
0
2,394,1
80
0
2,394,1

1,588,23
5
10,000
15,000
6,000
5,000
12,000
30,000
10,000
42,000
4,000
10,000
5,000
1,737,2
35
3,092,2
40
0
3,092,2
40
0
3,092,2
40
0
3,092,2

1,588,23
5
10,000
15,000
6,000
5,000
12,000
30,000
10,000
42,000
4,000
10,000
5,000
1,737,2
35
3,790,3
00
0
3,790,3
00
0
3,790,3
00
0
3,790,3

1,588,23
5
10,000
15,000
6,000
5,000
12,000
30,000
10,000
42,000
4,000
10,000
5,000
1,737,2
35
4,488,3
60
0
4,488,3
60
0
4,488,3
60
0
4,488,3

1,588,23
5
10,000
15,000
6,000
5,000
12,000
30,000
10,000
42,000
4,000
10,000
5,000
1,737,2
35
5,186,4
20
0
5,186,4
20
0
5,186,4
20
0
5,186,4

1,588,23
5
10,000
15,000
6,000
5,000
12,000
30,000
10,000
42,000
4,000
10,000
5,000
1,737,2
35
5,884,4
80
0
5,884,4
80
0
5,884,4
80
0
5,884,4

1,588,23
5
10,000
15,000
6,000
5,000
12,000
30,000
10,000
42,000
4,000
10,000
5,000
1,737,23
5
6,582,54
0
0
6,582,54
0
0
6,582,54
0
0
6,582,54

1,588,23
5
10,000
15,000
6,000
5,000
12,000
30,000
10,000
42,000
4,000
10,000
5,000
1,737,23
5
7,280,60
0
0
7,280,60
0
0
7,280,60
0
0
7,280,60

1,588,23
5
10,000
15,000
6,000
5,000
12,000
30,000
10,000
42,000
4,000
10,000
5,000
1,737,23
5
7,978,66
0
0
7,978,66
0
0
7,978,66
0
0
7,978,66

1,588,23
5
10,000
15,000
6,000
5,000
12,000
30,000
10,000
42,000
4,000
10,000
5,000
1,737,23
5
8,676,72
0
0
8,676,72
0
0
8,676,72
0
0
8,676,72

INFLOWS:
Cash B/F
Seed Loan
Promoter's Equity
Sales Revenue
Total Inflows

0
4,000,00
0
500,000

0
0

OUTFLOWS:
Cost of Goods Sold
Gross Profit
Operating
Expenses
Transaction Costs
Rent
Labour
Utilities
Fuel & Oil
General & Admin.
Sales & Marketing
Overhead Costs
Insurance
Consumables
Misc & contingencies
Depreciation*
Total Opex
EBITDA
Loan Interest
Net Profit Before
Tax
Corporate Tax (30%)
Earnings After Tax
Loan Repayment
Net Profit

39

0
0
0
0
0
0
0
0
0
0
0
0
0
12,876,7
20
800,000
12,076,7
20
3,623,016
8,453,70
4
800,000
7,653,70

BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN


Cash Balance C/F

20

80

40

00

60

20

80

998,060

1,696,12
0

2,394,18
0

3,092,24
0

3,790,30
0

4,488,36
0

5,186,42
0

5,884,48
0

6,582,54
0

7,280,60
0

7,978,66
0

8,676,72
0

7,653,704

Table 7-2: White Maize Export/Import 5-Year Net Income Statement (In USD)
YEAR
Maize Tonnage
INFLOWS:
Cash B/F
Seed Loan
Promoter's Equity
Sales Revenue
Total Inflows
OUTFLOWS:
Cost of Goods Sold
Gross Profit
Operating Expenses
Transaction Costs
Rent
Labour
Utilities
Fuel & Oil
General &
Administrative
Sales & Marketing
Overhead Costs
Insurance
Consumables
Miscellaneous &
contingencies
Depreciation*
Total Opex
EBITDA
Loan Interest (20% p.a.)
Net Profit Before Tax

Year 1
120,000

Year 2
120,000

Year 3
120,000

Year 4
120,000

Year 5
120,000

4,000,000
500,000
50,400,000
54,900,00
0

7,653,704
0
0
52,920,000
60,573,70
4

10,268,582
0
0
55,566,000
65,834,58
2

12,521,046
0
0
58,344,300
70,865,34
6

14,535,323
0
0
61,261,515
75,796,83
8

21,176,460
33,723,54
0

22,235,283
38,338,42
1

23,347,047
42,487,53
5

24,514,400
46,350,94
7

25,740,119
50,056,71
8

5% increase

19,058,820
120,000
180,000
72,000
60,000

20,011,761
126,000
189,000
75,600
63,000

21,012,349
132,300
198,450
79,380
66,150

22,062,967
138,915
208,373
83,349
69,458

23,166,115
145,861
218,791
87,516
72,930

5%
5%
5%
5%
5%

increase
increase
increase
increase
increase

144,000
360,000
120,000
504,000
48,000

151,200
378,000
126,000
529,200
50,400

158,760
396,900
132,300
555,660
52,920

166,698
416,745
138,915
583,443
55,566

175,033
437,582
145,861
612,615
58,344

5%
5%
5%
5%
5%

increase
increase
increase
increase
increase

120,000
60,000
20,846,82
0
12,876,72
0
800,000
12,076,72

126,000
60,000
21,886,16
1
16,452,26
0
640,000
15,812,26

132,300
60,000
22,977,46
9
19,510,06
6
480,000
19,030,06

138,915
60,000
24,123,34
3
22,227,60
4
320,000
21,907,60

145,861
60,000
25,326,51
0
24,730,20
9
160,000
24,570,20

40

Notes

5% increase

5% increase

20% on loan principal

BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN


Corporate Tax (30%)

0
3,623,016

Earnings After Tax


Loan Repayment

8,453,704
800,000

Net Profit
Cash Balance C/F

7,653,704

0
4,743,678
11,068,58
2
800,000
10,268,58
2

6
5,709,020
13,321,04
6
800,000
12,521,04
6

4
6,572,281
15,335,32
3
800,000
14,535,32
3

9
7,371,063
17,199,14
6
800,000
16,399,14
6

7,653,704

10,268,582

12,521,046

14,535,323

16,399,146

41

30%

BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN


8.0
9.0

RISK MANAGEMENT
9.1

Critical Risk Factors

10.0
10.1.1

Market Risks

11.0
12.0 There are a few areas of risk within the maize trading sector. First and
foremost is drought. Drought causes significant increases in demand
for maize grain and the price shoots up quite markedly as there
demand greatly exceeds available supplies.The high maize grain
purchase costs may impact negatively on the profitability of a maize
exporting enterprise as the end-market pricing may not necessarily
adjust in the same proportions as the upward movement in source cost
price especially if fixed end-market prices are built into lengthy maize
supply contracts. Conversely, in times of plentiful rain harvest yields
are higher and maize costs at source go down in response to
competition from plentiful supply of other food crops that are also
available in the maize production areas. In both cases one can help
mitigate the losses by gathering and bulking maize grain at times of
plenty and selling it at times of scarcity. Hence the need and
advantage of having large maize crop storage warehouses at the
source points.
13.0
13.1.1
Operations Risks
14.0
15.0 Fuel can become expensive, especially in times of political instability in
Kenya because most oil is imported through the eastern border.
Although the cost to clean and package the maize will increase as fuel
prices increase, it is believed that most, if not all, of the cost can be
passed on to the customers in a higher price because the
transportation costs to take the maize elsewhere will rise with the fuel
costs as well.
16.0
17.0 An additional risk is that the pre-export maize-cleaning and bagging
machines will break down and create expenses and/or downtime. This
will be addressed by ensuring the maintenance procedures are
followed correctly and timely. In addition to proper maintenance, the
company should have the most common failure spare parts on hand
(many spares are included with the engine, but as parts are used they
will be replaced before failure so downtime is cut down).
18.0
19.0
42

BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN


20.0
21.0
22.0
22.1 Risk Mitigation
23.0

24.0 XYZ COMPANYs risk appetite is aligned with the companys strategy
of long-term and sustainable growth. Being exposed to trade in
multiple commodities and countries, effective risk management will be
critical to XYZ COMPANYs ongoing success and operational integrity.
The companys risk governance structures have to afford robust
oversight, delineation of roles, accountability and independent
assurance. Primary direction will be provided by the Board Risk
Committee consisting of members independent of the trading
company, while day-to-day oversight will be provided by the Executive
Risk Committee represented by suitably qualified senior management.
25.0
26.0 The companys risk management framework gives recognition to all
the intrinsic risks of its ongoing activities while maintaining a proactive
stance in assessing trade practices and exposure. Whereas its policies
and processes promote a strong culture of communication and risk
awareness, a central risk platform is charged with aggregating,
monitoring and reporting on market, credit and forex risk relating to
physical and forward commodity and freight exposure.
27.0
28.0 Limit structures are clearly defined and the result of balancing risk
tolerance against operational and financial capabilities. Unmandated
residual exposure is therefore hedged, sold, or financed as appropriate
with vetted counterparties. XYZ COMPANY also deploys a
combination of ancillary risk metrics to measure and quantify downside
risk, including: value at risk (VaR), scenario and stress testing.
29.0
30.0 SYSTEMS & REPORTING
31.0
32.0 XYZ COMPANY plans to immediately embark on the implementation
of a fully integrated commodity trade and risk management system
(CTRM) in its continued efforts to enhance its Risk Management
capabilities.
33.0
34.0 The CTRM solution will integrate with the organizations existing
enterprise resource planning (ERP) solution and aims to deliver the
following benefits to the end users in XYZ COMPANY:
35.0
43

BUSINESS CASE: UGANDA MAIZE EXPORT TO SOUTH SUDAN

An efficient platform for capturing and managing the trade lifecycle


An integrated view of inventory, goods in transit and contract positions
for an effective logistics management process
A seamless integration with existing infrastructure for retrieving,
viewing, validating, settling and invoicing of physical and derivatives
positions
A robust framework for risk management on commodities, credit and
foreign exchange
Position and limit management which will cater for marking of
exposure, profit and loss attribution, and risk measurement (VaR)

36.0
37.0
38.0
39.0 typical maize flows in south sudan - world bank
40.0

41.0 Uganda maize area planted 2014


42.0 https://millionaresfarm.wordpress.com/2013/07/02/how-toyield-4-tons-from-an-acre-of-maizehttpfacomug-comindexhtml/
43.0 Millionaires Farm Uganda
44.0
45.0 Maize prices in South Sudan
46.0 http://www.ratin.net/site/page/south+sudan?
currency=UGX&measure=1
47.0
48.0 Exchange rate of south Sudanese pound to us dollar
49.0
50.0 Cargo freight rates for Kampala to Juba
51.0
52.0 operating expenses for a maize exporting company
53.0
54.0
55.0 income expenditure and cash flow statement - maize exporting
company
56.0
57.0 http://geo.acaps.org/
58.0 acaps south sudan

44